The downloadable bank

By Richard Copland.

I recently spent the day at WIRED Money, where the ideas design business and technology media entity brought together the people and businesses disrupting the world of finance. The event offered a range of sessions covering themes and technologies changing the face of money.

With Brett King from Moven saying that the traditional banking model involving branches, ATMs and application forms is redundant in a digital age and when you consider that the most powerful smartphone of 2014 has more computing power than RBS or HSBC had in 1985 then we are very much in a new world.

Another of the speakers Matthias Kroner from Fidor, an internet community bank, challenged the attendees by saying “to revolutionise banking in a truly global way, financial services need to be open – to their customers, to change and to innovation”. He called out a powerful learning that process won over price citing same-day lenders with their ease and convenience as evidence.

The rise of the digital bank

The session amplified the takeaways from a recent Mckinsey paper.  A digital transformation will put upward of 30 percent of the revenues of a typical European bank in play.  Add this to the view that banks can take out 20 to 25 percent of their cost base by leveraging this digital shift to transform how they process and service. You then have an incredibly strong position.

Competing on Digital: the rise of digital banking services

In engaging with start-ups and entrepreneurs one can easily get lost in the analysis they call out as justification for change.  The BBA’s report provides an excellent state of the nation to back up most of the claims.

Finding that digital usage by the British public continues to rise. 14.7 Billion banking apps have been downloaded so far this year and GBP 6.4 Billion is being transferred via the Internet every week (up from GBP5.8 Billion last year).  6.6 million clients use Lloyds banking apps every week in 2014 so far. That compares to 4.7 million for the whole of 2013. 750,000 people have signed up to the new Paym service remitting a total transaction volume of GBP520 million.

Some serious numbers on the move to digital and with the use of branches continuing to fall and in the case of RBS/Nat West, branch usage has fallen from 25% of transactions in 2010 to only 10% today.

The world is changing

Digitization is changing the traditional financial services business model, in some cases radically. The good news is that there are substantial prizes to be had to those willing to embrace it. The bad news is that change is coming whether or not they are ready.